HSBC Global Asset Management Global Head of Institutional Sales Barbara Rupf Bee talks to Chris Panteli about the move away from fixed income, growing interest in emerging market debt and the changing role of hedge funds
Chris Panteli: What are the main demands you’re hearing from pension funds at the moment?
Barbara Rupf Bee: It is difficult to answer that on a global level because pensions industry has developed independently in different regions and are at different evolutionary stages.
One thing I do see happening, and if I look at my request for proposals statistics it comes out loud and clear, is the switch from fixed income demand to equity demand. The increase of RFPs overall has been quite remarkable but the interest in equities in particular has been particularly significant. We had a continued run for fixed income last year, so the biggest requests for us were for European fixed, Asian fixed and emerging market debt. However, if I look at Q3 and Q4 there was an increasing turn to equity. Requests for European equity were heavy and we started seeing requests for Latin American regional equity. Global emerging markets also received a lot of interest, but there were more requests for information rather than RFPs.
All this leads me to believe there’s a shift taking place. You know how long it takes for asset allocation grids to change, so you can see people are looking at it and assessing it before they go to the RFP stage, beauty contests etc. Mandate awards take about six months to come to fruition so are likely to start coming through as we move into Q2 and Q3 of 2011. There’s a big change going on into more riskier assets in equities and I see it continuing.
Chris Panteli: Are you seeing more interest in emerging market debt or equity?
Barbara Rupf Bee: In terms of fixed income capabilities, emerging market debt is our bread and butter. On the institutional side, we started focussing on that capability two and a half years ago and have a very good track record and established team. When we started it was mostly about educating consultants and clients about that capability, and then two years ago it started to get bigger in terms of investments, and as of Q4 2010, it made up the biggest percentage of our emerging market RFP requests. In Q4 alone about 60% were for emerging market debt, which is a lot.
We see a big change within the evolved players in the pension world who are starting to allocate into emerging market debt (EMD) rather than just global fixed income. Developed debt and emerging market debt has clearly different paths and if you look at the recent inflation data that manifests itself very clearly.
